Week 4 Flashcards
What is accounts payable?
Account for financial obligations to suppliers after purchasing products or services on credit.
What is a current liability?
Debt or obligation due within one year or, in rare cases, a company’s standard operating cycle, whichever is greater.
What is the current portion of a note payable?
Portion of a long-term note due during the company’s current operating period.
What is gross income (pay)?
Amount earned by the employee before any reductions in pay occur due to involuntary and voluntary deductions.
What is interest?
Monetary incentive to the lender, which justifies loan risk. Interest is paid to the lender by the borrower.
What is an involuntary deduction?
Withholding that neither the employer nor the employee have control over and is required by law.
What is net income (pay)?
(Also take home pay.) Remaining employee earnings balance after involuntary and voluntary deductions from employee pay.
What is a note payable?
Legal document between a borrower and a lender specifying terms of a financial arrangement. In most situations the debt is long-term.
What is principal?
Initial borrowed amount of a loan, not including interest. Also, face value or maturity value of a bond (the amount to be paid at maturity).
What are taxes payable?
Liability created when a company collects taxes on behalf of employees and customers.
What is unearned revenue?
Advance payment for a product or service that has yet to be provided by the company. The transaction is a liability until the product or service is provided.
What is a voluntary deduction?
Not required to be removed from employee pay unless the employee designates reduction of this amount.
What is amortization?
Allocation of the costs of intangible assets over their useful economic lives. Also process of separating the principal and interest in loan payments over the life of a loan.
What is compound interest?
In a loan when interest earned also earns interest.
What is debt financing?
Borrowing money that will be repaid on a specific date in the future in order to finance business operations.
What is equity financing?
Selling part of the business to obtain money to finance business operations.
What are fully amortized notes?
Periodic loan payments that pay back the principal and interest over time with payments of equal amounts.
What is a long-term liability?
Debt settled outside one year or one operating cycle, whichever is longer.
What is a promissory note?
Represents a personal loan agreement that is a formal contract between a lender and borrower.
What is the straight-line method?
Method of calculating interest expense that allocates the same amount of premium or discount amortization for each of the bond’s payment periods.
